I have a townhouse and was thinking of putting my 3 kids on the title. Is this a good idea? Why or why not?
Written by admin on January 16, 2015
- I have a townhouse and was thinking of putting my 3 kids on the title to avoid taxes upon my death. Is this a good idea? Why or why not?
Unless you are terminally ill and expect to die within a year, this is not generally a good idea if the only reason is to “save tax”.
The only tax saving is with respect to the probate fee of 1.4% of the value of the townhouse. However, if the children are not residing in the home, they cannot claim the principal residence exemption to capital gains tax on the home; therefore one half of 3/4 of the gain from the date of transfer to date of sale will be subject to the capital gains tax (the rate is based on marginal rates with a maximum of about 45%). If property values continue to rise, this tax will be far greater than the saving in probate fees. Other problems include the possibility of a child mortgaging their share, losing their share to their creditors or, most common, if the child’s marriage breaks down, their ex-spouse is entitled to half of what the child owns, with the consequent need to buy out the ex-spouse or sell the property.
On the other hand, it is a good tactic to minimize a potential Wills variation claim.*
*A Will variation claim can be made by your surviving spouse or one or more of your children. They would apply to the BC Supreme Court seeking an order that the terms of your Will be changed.
HUGH MCLELLAN, Lawyer
Nidus partnered with BC Courthouse Libraries to raise awareness about BC’s essential legal planning documents and the Nidus Registry. The kick off event was held on September 15th at the Vancouver Public Library Central Branch with a panel of experts in the field. Questions that were submitted will be answered in a series of posts by Nidus and various panel members. To see photos from the event click Gallery; and click Registry Sing-a-long for the fun of it!